ECONversations Economic and Policy Briefing Webcast Dave Altig, - - PowerPoint PPT Presentation

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ECONversations Economic and Policy Briefing Webcast Dave Altig, - - PowerPoint PPT Presentation

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ECONversations Economic and Policy Briefing Webcast Dave Altig, Research Director November 19, 2014 2:00 p.m. ET Questions for Dave: events@atl.frb.org Technical issues: james.dooley@atl.frb.org Information received since the Federal Open

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ECONversations

Economic and Policy Briefing Webcast Dave Altig, Research Director November 19, 2014 2:00 p.m. ET Questions for Dave: events@atl.frb.org Technical issues: james.dooley@atl.frb.org

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“Information received since the Federal Open Market Committee met in September suggests that economic activity is expanding at a moderate pace.”

FOMC Statement October 28, 2014

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The numbers don’t lie.

3

Annualized Real GDP Growth 2013 2014 Q1 Q2 Q3 Q4 Forecast

3.1

  • 2.1

4.6 3.5 2.1

Sources: Bureau of Economic Analysis, Macroeconomic Advisers

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SLIDE 4

“Household spending is rising moderately and business fixed investment is advancing…”

FOMC Statement October 28, 2014

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5

  • ­‑6.0 ¡
  • ­‑4.0 ¡
  • ­‑2.0 ¡

0.0 ¡ 2.0 ¡ 4.0 ¡ 6.0 ¡ 8.0 ¡ 10.0 ¡ 12.0 ¡

2010-­‑01-­‑01 ¡ 2010-­‑03-­‑01 ¡ 2010-­‑05-­‑01 ¡ 2010-­‑07-­‑01 ¡ 2010-­‑09-­‑01 ¡ 2010-­‑11-­‑01 ¡ 2011-­‑01-­‑01 ¡ 2011-­‑03-­‑01 ¡ 2011-­‑05-­‑01 ¡ 2011-­‑07-­‑01 ¡ 2011-­‑09-­‑01 ¡ 2011-­‑11-­‑01 ¡ 2012-­‑01-­‑01 ¡ 2012-­‑03-­‑01 ¡ 2012-­‑05-­‑01 ¡ 2012-­‑07-­‑01 ¡ 2012-­‑09-­‑01 ¡ 2012-­‑11-­‑01 ¡ 2013-­‑01-­‑01 ¡ 2013-­‑03-­‑01 ¡ 2013-­‑05-­‑01 ¡ 2013-­‑07-­‑01 ¡ 2013-­‑09-­‑01 ¡ 2013-­‑11-­‑01 ¡ 2014-­‑01-­‑01 ¡ 2014-­‑03-­‑01 ¡ 2014-­‑05-­‑01 ¡ 2014-­‑07-­‑01 ¡

Nonresiden6al ¡Fixed ¡Investment ¡and ¡Personal ¡Consump6on ¡ ¡

Year-­‑over-­‑Year ¡Percent ¡Change ¡ ¡

Nonresidential Fixed Investment Personal Consumption Expenditures

“Household spending is rising moderately and business fixed investment is advancing…”

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“… while the recovery in the housing sector remains slow.”

FOMC Statement October 28, 2014

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“… the recovery in the housing sector remains slow.”

7

1000 2000 3000 4000 5000 6000 7000 200 400 600 800 1000 1200 1400 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

U.S. Single-Family Home Sales 12-month moving average, thousands, SAAR

Source: National Association of Realtors, Census Bureau through September 2014

Existing (right axis): 4296 New (left axis): 437

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“Labor market conditions improved somewhat further, with solid job gains and a lower unemployment rate.”

FOMC Statement October 28, 2014

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  • 1000
  • 800
  • 600
  • 400
  • 200

200 400 600 08 09 10 11 12 13 14 220 214 12-month average Monthly change

Payroll Employment Changes

seasonally adjusted, thousands of jobs Source: Bureau of Labor Statistics

data through October 2014 9

The trend in job growth has been rock solid, and drifting upward.

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Unemployment rate projections have been persistently

  • verly pessimistic.

5 5.5 6 6.5 7 7.5 8 8.5 9 9.5 10 4Q2010 4Q2011 4Q2012 4Q2013 4Q2014 4Q2015 4Q2016 4Q2017

Percent, quarterly average

Source: U.S. Bureau of Labor Statistics, Federal Reserve Board

Actual Sept-14

Interest rates low until mid-2013 (Aug) Maturity Extension Program (Sept) Open-ended MBS purchases (1st shot

  • f QE3)

“Tapering” announced

Jun-11 Sep-12 Dec-13

Dashed lines represent midpoint of FOMC Summary of Economic Projections as of the indicated date.

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“On balance, a range of labor market indicators suggests that underutilization of labor resources is gradually diminishing. ”

FOMC Statement October 28, 2014

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We view broader measures of unemployment as improved, but short of “mandate consistent.”

3 5 7 9 11 13 15 17 19 00 02 04 06 08 10 12 14 Part time for economic reasons Civilian Unemployment Rate: 16 yr +

Civilian Unemployment Rate (U-3) vs. Broad Unemployment (U-6)

percent, SA Source: Bureau of Labor Statistics

5.7 ppts 4.8 ppts

12 Note: Figures cited are as of Jan. 2007 and Oct. 2014

Conventional Unemployment Rate (U-3)

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The job growth is there…

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  • 0.5

0.5 1 1.5 2 09 11 13 Million

  • 0.10M
  • 0.5

0.5 1 1.5 2

09 11 13

+0.17M

  • 0.5

0.5 1 1.5 2 09 11 13

+0.09M

  • 0.5

0.5 1 1.5 2 09 11 13

+1.75M

  • 0.5
0.5 1 1.5 2

09 11 13

+0.46M

  • 0.5

0.5 1 1.5 2 09 11 13

+0.90M

  • 0.5
0.5 1 1.5 2

09 11 13

+1.19M

  • 0.5
0.5 1 1.5 2

09 11 13

+1.68M

through Oct.

Source: U.S. Bureau of Labor Statistics

Cumulative change in payrolls for select sectors, since June 2009

Information Financial Activities Construction Health care and social assistance Manufacturing Retail Trade Temporary help services Leisure and hospitality

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… but where is the wage growth?

14

  • 0.5

0.5 1 1.5 2 09 11 13 Million

  • 0.10M
  • 0.5

0.5 1 1.5 2

09 11 13

+0.17M

  • 0.5

0.5 1 1.5 2 09 11 13

+0.09M

  • 0.5

0.5 1 1.5 2 09 11 13

+1.75M

  • 0.5
0.5 1 1.5 2

09 11 13

+0.46M

  • 0.5

0.5 1 1.5 2 09 11 13

+0.90M

  • 0.5
0.5 1 1.5 2

09 11 13

+1.19M

  • 0.5
0.5 1 1.5 2

09 11 13

+1.68M

through Oct.

Source: U.S. Bureau of Labor Statistics

$0 $10 $20 $30 $40 09 11 13 $34.28 in Oct. Information

Cumulative change in payrolls for select sectors, since June 2009 Average hourly earnings for select sectors, from highest-paying to lowest-paying and adjusted for inflation

$0 $10 $20 $30 $40

09 11 13 $30.91 in Oct. Financial Activities

$0 $10 $20 $30 $40

09 11 13 $26.86 in Oct. Construction

$0 $10 $20 $30 $40

09 11 13 $25.05 in Sep. Health care and social assistance

$0 $10 $20 $30 $40

09 11 13 $24.96 in Oct. Manufacturing

$0 $10 $20 $30 $40

09 11 13 $17.09 in Oct. Retail Trade

$0 $10 $20 $30 $40

09 11 13 $16.39 in Sep. Temporary help services

$0 $10 $20 $30 $40

09 11 13 $14.06 in Oct. Leisure and hospitality

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“Inflation has continued to run below the Committee's longer-run objective.”

FOMC Statement October 28, 2014

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Growth rate in the core PCE has been at 1.5 percent since May.

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 10 11 12 13 14

PCE Price Index

year-over-year percent change, monthly

PCE Core PCE

Sources: Bureau of Economic Analysis FOMC’s inflation objective through September 2014 (annualized % change) Overall PCE Core PCE September 2014 0.9 1.5 August 2014

  • 0.6

0.9 July 2014 1.0 1.2 June 2014 2.7 1.9

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“Market-based measures of inflation compensation have declined somewhat; survey-based measures of longer-term inflation expectations have remained stable.”

FOMC Statement October 28, 2014

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“Market-based measures of inflation compensation have declined…; survey-based measures have remained stable.”

1.5 2.0 2.5 3.0 3.5 12-12 06-13 12-13 06-14 Source: St. Louis FED

5-Year, 5-Year Forward Inflation Expectation Rate

percent

through November 5, 2014 1.0 1.5 2.0 2.5 3.0 10-12 04-13 10-13 04-14 10-14

Inflation Expectations Measures

percent, year-ahead

Survey of Professional Forecasters Atlanta Fed Business Inflation Expectations

Sources: Atlanta Fed, Philadelphia Fed SPF through Q3 2014, BIE through October 2014

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“In determining how long to maintain this target range, the Committee will assess progress – both realized and expected - toward its objectives of maximum employment and 2 percent inflation.”

FOMC Statement October 28, 2014

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We believe we are still short of the FOMC’s mandate.

1 2 3 4 5 6 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Progress Towards Objectives: U-3 gap versus U-6 gap (Using Core PCE)

through October 2014 20

Distance from goal based on U-6 gap Distance from goal based on U-3 gap

Source: Bureau of Labor Statistics; James Bullard’s July 17, 2014 speech; authors’ calculations

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ECONversations

Economic and Policy Briefing Webcast Dave Altig, Research Director November 19, 2014 2:00 p.m. ET Questions for Dave: events@atl.frb.org Technical issues: james.dooley@atl.frb.org